Easily the biggest question in real estate, to rent or to buy is something that most Australians will ask themselves at some point in time. ‘Rent money is dead money’ it was once believed, but with housing affordability in question in hot property markets like Sydney and Melbourne, debate on this prominent issue is really heating up. There are positives and pitfalls affecting both options, but ultimately, the choice is yours and the choice you make should reflect your financial and personal situation and plans best. Renting offers greater flexibility in many regards, but owning your own home offers greater security in the long term once you’ve repaid the mortgage.
Renting Is a More Affordable Alternative to Buying, But…
When you look at how much you’ll pay weekly in mortgage repayments it’s obvious that renting is a cheaper alternative to buying a home. But there are many pitfalls to renting long term, including:
- The home is never yours and you don’t have much of a say as to how long you’ll live there. When your lease is up you may have to find a new home.
- As you can’t renovate or make changes to the property without the landlord’s approval, a rental property may never really feel like your own home.
- Rental rates will always increase alongside property prices. Whilst it may be cheaper to rent, don’t expect rental rates to remain stable. They’ll always rise.
That isn’t to say that you should rush to buy a home of your own either. Most people rent before they buy, so don’t feel you need to buy a home right now, wait until your financial and personal situation makes buying a home of your own a sound idea.
Owning Your Own Home Offers Greater Long Term Security, But…
In the long term, owning your own home makes perfect sense because it offers long term security. Bear in mind that owning property is widely considered a prerequisite for a comfortable retirement and that there are many benefits associated with owning property.
Owning a home will never be as flexible an arrangement as renting because there are costs involved when buying and selling property – roughly 4% of the sale price goes to selling costs and 6% of the buying price goes to buying costs.
If your financial and personal situation means buying a home makes sense, then go for it, there are many benefits to owning your own home. But if it doesn’t make sense at the moment, you may like to consider the following option that’s proving popular.
Become a Renting Property Investor – Another Option to Consider
Another option to consider is that of buying a property where you can afford to buy and living somewhere, like the inner city, where you can only afford to rent. Even with rising rental rates, rental costs will still be lower than your mortgage repayments on a similar property and your tenants will pay off your mortgage on your behalf.